Harris approves sale of Catholic hospitals to Prime - with conditions

St. Vincent Medical Center near downtown Los Angeles is one of six hospitals of the Daughters of Charity Health System that Prime Healthcare Services had offered to buy.

St. Vincent Medical Center near downtown Los Angeles is one of six hospitals of the Daughters of Charity Health System that Prime Healthcare Services had offered to buy. (Brian van der Brug / Los Angeles Times)

California Atty. Gen. Kamala D. Harris on Friday approved the hotly debated sale of a chain of six struggling Catholic hospitals — including two in Los Angeles County — but imposed strict conditions on how they will be managed.

The requirements left the future of the Daughters of Charity Health System hospitals in doubt — at least for several days.

Prime Healthcare Services Inc. of Ontario said it would need days to review Harris’ ruling before deciding whether to proceed with the purchase, which includes St. Francis Medical Center in Lynwood and St. Vincent Medical Center near downtown Los Angeles.

Harris said she would require Prime Healthcare to keep all of the hospitals open for 10 years — including four of them as acute-care hospitals — and insisted they provide the same level of charity care to indigent patients as Daughters of Charity had.

“We will do a careful analysis and hope to reach a decision within a week,” said Dr. Kavitha Reddy Bhatia, vice president of clinical transformation for Prime Healthcare. She is the daughter of the company’s founder, Dr. Prem Reddy. “We very much remain committed to the future success of these hospitals.”

The closely watched sale has been a hot-button issue across California for months, with more than 7,600 jobs and vital healthcare services to a number of lower-income communities hanging in the balance. It brought together unlikely allies in the nonprofit Catholic chain that has specialized in healthcare for the poor, and Reddy, an Ontario-based turnaround expert and cost-cutter who has built a fast-growing chain of 30 hospitals.

In October, Prime Healthcare agreed to pay about $843 million in cash and assumed debt to acquire the six hospitals. A key part of the agreement was Prime Healthcare’s promise to assume $300 million of liability for the pensions of 17,000 current and former Daughters of Charity employees.

The proposed sale quickly drew strong opponents and supporters. Some unions and elected officials had lobbied Harris to block the sale, saying Prime Healthcare was more concerned with profits than treating the sick and poor. Those who backed the sale noted Prime Healthcare’s history of saving troubled hospitals and said the company was the best option to save the struggling Catholic hospitals.

Workers at St. Vincent Medical Center near downtown Los Angeles cheered the approval.

“I hope that Prime carries on the tradition of helping the poor,” said Don Baisa, who works as a shuttle driver at St. Vincent. “Lots of people need this place. It is in the heart of L.A.”

Bill Holifield, who said he has worked at St. Vincent for 46 years, said news of the sale was a relief. It meant he, his co-workers and retirees would get to keep their pensions.

“There are a lot of good people here,” he said. “It would be a shame for us to close our doors.”

Prime Healthcare’s Bhatia said the requirement to keep the hospitals open so long in the face of an ever-changing industry “has never been imposed on any other hospital acquisition in California history.”

The Daughters of Charity hospital chain, reportedly losing more than $10 million per month, said it probably would file for bankruptcy protection and slash services if the deal was not approved. Executives remained optimistic shortly after Harris’ conditional approval of the sale.

“I’m hopeful on the first glance,” said Daughters of Charity Chief Executive Robert Issai.

The proposed sale divided organized labor, with the California Nurses Assn. supporting it and the SEIU-United Healthcare Workers West lobbying Harris to block Prime Healthcare’s ownership.

“We would hope that Prime will comply with these conditions, which will keep the hospitals open just as nurses, nuns, patients and community residents have rallied to achieve,” said RoseAnn DeMoro, executive director of the California Nurses Assn.

The SEIU maintained that Prime Healthcare had a history of reducing services to the poor and inflating bills to increase profits. But the union was optimistic Friday.

The union, which represents about 2,600 Daughters of Charity employees, applauded Harris’ requirements as a victory for the communities the hospitals serve.

“These conditions will go a long, long way to make sure Prime does not run these institutions the way they run their other institutions,” said Dave Regan, president of the SEIU-UHW.

Debra Amour, a nurse at Seton Medical Center in Daly City, called the decision a win for nurses across the state and urged Prime to accept the conditions placed upon the deal.

“It's a really scary thing to not only have your job threatened but really your whole community threatened if your hospital closes,” she said. “We are really happy about it.”

Meanwhile, Santa Clara County government was disappointed by the decision. Two of the six Daughters of Charity hospitals are in that county: one in San Jose, one in Gilroy.

“Regardless of the conditions placed upon Prime Healthcare, the county believes that the decision jeopardizes the health of the county’s neediest and most vulnerable residents by reducing their access to critical medical services,” the county said in a statement.

Harris declined to discuss her decision Friday. In an interview Wednesday, she told The Times that her decision would be “based on protecting access to healthcare services and maintaining the continuity of care — that’s a big concern and a big issue — and then protecting workers.”